Small businesses, global reach

Tuesday

Mar 17, 2015 at 2:01 AM

By Lorelei Stevenslstevens@capecodonline.com

An experienced graphic designer in need of a new career, Cynthia Nolan didn’t really have a plan when she leased a Main Street storefront in Dennis Port in 2012. That is until she stumbled upon some tossed-out wood.

“I started making fish out of all the boards I could get my hands on,” she recalled. “I got the bug and started picking up old furniture and wood for repurposing. Each piece is different, and it all looks great.”

Today, Nolan’s studio and store, Sodium, is a showcase for her rustic, whimsical and colorful home décor pieces. She teaches classes there, fills custom orders and sells her products to the people who wander in.

Potential customers also can – and do – find her online, sometimes through her website, but even more likely through Etsy, the global online marketplace whose slogan is “Connecting people, reimagining commerce.”

“Basically, I use Etsy as an e-commerce site so I don’t have to build one myself,” Nolan explained.

She pays 20 cents for each item she lists on the site and then a percentage fee when an item sells. The company provides a payment processing service, a complete order slip with a mailing label, and even helps her offer advantageous shipping rates.

“I don’t think if I gave up the store I would give up on Etsy, which I can do from anywhere,” she said. “And it’s nice to feel part of that community.”

That’s pretty much what Etsy’s founders had in mind when they started the company in Brooklyn, New York, in 2005.

They wanted to provide a way for individual and small-scale crafters to sell their handmade goods locally and around the world. And they wanted it to do it according to a strict set of social values with the goal of empowering people, strengthening communities and protecting the environment.

So the March 4 announcement by CEO Chad Dickerson that the company had filed a proposed initial public offering with an estimated value of $100 million with the U.S. Securities and Exchange Commission raised a question among observers as well as the sellers and buyers in what the company calls the Etsy “ecosystem.”

How will Etsy remain true to its mission to “re-imagine commerce in ways that build a more fulfilling and lasting world” once it becomes beholding to stockholders looking for a return on investment?

As of Dec. 31, the company had 1.4 million active sellers and 19.8 million active buyers and a presence in just about every country in the world. Etsy member sellers generated gross sales of $1.93 billion last year and the company itself generated $195.6 million in revenue, although it posted a net loss of $15.2 million in 2014, according to its prospectus.

There are 192 members on what the company calls "Team Cape Cod," made up of sellers from the Cape & Islands region.

Etsy’s growth potential comes from its position at the center of what the company calls “several converging macroeconomic trends.”

Citing various sources, the prospectus noted that: global online and mobile commerce increased from $280 billion in 2008 to $695 billion in 2013; 53 percent of consumers preferred to buy from an individual producers in 2014; 53 million Americans worked as freelancers in 2014; and 65 percent of manufacturing establishments had 19 or fewer employees in 2011.

David McPherson, founder of Falmouth-based Four Ponds Financial Planning, offered common sense advice to anyone considering investing in Etsy when the IPO goes through.

“I generally don’t recommend IPOs to by clients because they tend to be high risk,” he said. “You have to have the stomach for that kind of investment.”

McPherson urged interested investors to take a look at the Etsy prospectus.

Etsy said that it’s “path ahead” includes making interactions with the company an “everyday experience” by strengthening its mobile platforms and by investing in local marketing around the world.

It also intends invest in marketing and enhance the services it offers seller so that crafters can spend less time on administrative duties. And, it plans to further develop its strategic partnerships, public-private ventures, and its “manufacturing program” to bring the Etsy entrepreneurial opportunity to more people in more places.

The manufacturing program reference relates to a relatively recent policy change for company. For eight years, the only sellers eligible to do business through Etsy were crafters, artists, and collectors of vintage goods at least 20 years old and people selling handmade and non-handmade crafting supplies.

In 2013, the company adopted new policies that allowed manufacturers to help sellers create their handmade items.

The IPO announcement in light of that policy change raises concerns for Eda Stepper and Roberta Karp of Mashpee, who worry that their business, Mah Jongg Remade, won’t be able to compete with cheaper manufactured handmade items.

About three years ago, Stepper and Karp took a shared passion for the 19th century Chinese game mah jongg and began creating jewelry, bags, towels, soaps, and even menorahs using actual game tiles or the tile motif.

Family members helped them build a Mah Jongg Remade website and, from there, set up their Etsy “store.”

“Etsy has given us the ability to be worldwide and live,” Karp said. “We have sold in almost every state in the continental U.S. plus Hawaii and England. They make it so easy for you.”

Mah jongg, a craze in 1920s, has remained popular.

“People buy for their mothers, for their friends,” said Stepper, who teaches mah jongg at the Falmouth Community School and other continuing education and senior center programs.

“People always come to us and say they remember the clicking of the tiles when their mothers and grandmothers would play,” Karp added. “We hear such wonderful stories.”

The strong niche demand prompted Stepper and Karp to hire two women, one locally and one out of state, to sew the handmade tile bags, duffels, and purses sold through Mah Jongg Remade’s Etsy store. Karp’s husband, Marvin Karp, also helps with order fulfillment and with the jewelry line.

“So each of us is employed in this little business,” Karp said. “We’re retired but we love this and it provides us with pocket money.”

Stepper said she is concerned that the IPO will result in investor-driven changes that will price Mah Jongg Remade out of the market, a concern Karp shares.

“We cannot compete with imports like on eBay,” she said. “Etsy started out with everything being handmade crafts and that’s what we make, all here in the U. S.”

Cynthia Nolan of Sodium views the IPO with less concern.

“Etsy is now really getting into promotion and anything that gets its name out there is a good thing,” she said. “Putting the company on the stock market will raise its visibility.”